EU charges Apple with developer fee extortion and DMA non-compliance
Apple is slowly shaping up to be the biggest target of the new anti-monopoly tech regulations in Europe, as laid out in the Digital Markets Act (DMA) of the European Commission (EC).
It just became the first company slapped with a warning that it is not complying with DMA, and the ECannounced it has initiated a probe into its newly minted developer fees and payment restrictions:
Our preliminary position is that Apple does not fully allow steering. Steering is key to ensure that app developers are less dependent on gatekeepers’ app stores and for consumers to be aware of better offers.
Margrethe Vestager, EU competition head, June '24
What Vestager is referring to when they say "steering" is the ability of developers to show customers alternative means of payment via website links and the like. The European Union's Digital Market Act requires that all electronics devices sold on its territory allow alternative app installation and payment avenues so that both users and developers have a choice how to obtain and distribute their software.
Apple, however, manages to wiggle out of the alternative payment obligation that came with the unprecedented iOS 17.4 update with which it opened its walled garden software ecosystem under the threat of fines by the European Union.
It initially froze Fortnite and Epic's developer accounts, for instance, but then lifted the ban and simply stayed with a 27% charge on any revenue it will get via providing third-party links to its apps.
It initially froze Fortnite and Epic's developer accounts, for instance, but then lifted the ban and simply stayed with a 27% charge on any revenue it will get via providing third-party links to its apps.
It's precisely those types of shenanigans aiming to keep its App Store revenue that the European Commission has now charged Apple with. Its lawyers now have until next March to respond to the allegations and, if the response is deemed insufficient, Apple can be fined up to 10 percent of its worldwide revenue as per the new allegations:
- None of these business terms allow developers to freely steer their customers. For example, developers cannot provide pricing information within the app or communicate in any other way with their customers to promote offers available on alternative distribution channels.
- Under most of the business terms available to app developers, Apple allows steering only through “link-outs”, i.e., app developers can include a link in their app that redirects the customer to a web page where the customer can conclude a contract. The link-out process is subject to several restrictions imposed by Apple that prevent app developers from communicating, promoting offers and concluding contracts through the distribution channel of their choice.
- Whilst Apple can receive a fee for facilitating via the AppStore the initial acquisition of a new customer by developers, the fees charged by Apple go beyond what is strictly necessary for such remuneration. For example, Apple charges developers a fee for every purchase of digital goods or services a user makes within seven days after a link-out from the app.
Apple has long been adversarial to the idea of installing apps directly and bypassing its App Store vetting process, the so-called sideloading. Its argument is tried and true - sideloading increases the risk of installing malicious apps or throwing the system off track with shoddily coded apps.
The Digital Markets Act, however, requires that operating systems allow alternative ways for app installations or even third-party app sources, and if Apple keeps getting caught in breach of those requirements, it may be a subject to a huge fine.
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Things that are NOT allowed: